Rating Rationale
March 07, 2024 | Mumbai
Kesoram Industries Limited
Issuer not cooperating; Rating removed from ‘Watch Developing'; Rating Withdrawn
 
Rating Action
Rs.150.57 Crore Optionally Convertible DebenturesCRISIL BB+/Stable (ISSUER NOT COOPERATING*; Removed from 'Rating Watch with Developing Implications'; Rating withdrawn)
Rs.1548.5 Crore Non Convertible DebenturesCRISIL BB+/Stable (ISSUER NOT COOPERATING*; Removed from 'Rating Watch with Developing Implications'; Rating withdrawn)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities
*Issuer did not cooperate; based on best-available information
 
Please note that the rating(s) are based on best available information with the credit rating agency: the entity whose debt is being published via this rating rationale did not provide the requisite information needed to conduct the rating exercise or did not provide the No Default Statements (NDS) for the last three months and is therefore classified as 'non cooperative'.

Non cooperation by Issuer

CRISIL Ratings has been consistently following up with Kesoram Industries Limited (KIL) for obtaining information through letters and emails dated December 1, September 23 and September 21, 2023, among others, apart from telephonic communication. However, the issuer has remained non-cooperative.

 

The investors, lenders and all other market participants should exercise due caution with reference to the rating assigned/reviewed with the suffix 'issuer not cooperating' as the rating has been arrived at without any interaction with the management and is based on best available, limited or dated information regarding the company. Such non-cooperation by a rated entity may be a result of weakening of its credit risk profile. Ratings with the 'issuer not cooperating' suffix lack a forward-looking component.

Detailed Rationale

Despite repeated attempts to engage with the management of KIL, CRISIL Ratings has not received requisite information on either the financial performance or the strategic intent of the company, which restricts CRISIL Ratings’ ability to take a forward-looking view on the company’s credit quality. The rating action on KIL is consistent with the 'Assessing Information Adequacy Risk' criteria of CRISIL Ratings.

 

As mentioned in our previous rating rationale dated December 11, 2023, KIL has entered into a Composite Scheme of arrangement with UltraTech Cement Limited (UltraTech; rated ‘CRISIL AAA/Stable/CRISIL A1+’) for the demerger of KIL’s entire cement business undertaking into UltraTech. The debt instruments rated by CRISIL Ratings were also part of cement business undertaking of KIL. However, there was no clarity regarding these debt instruments towards the terms & conditions of transfer to UltraTech. Accordingly, the rating on these debt instruments were placed on ‘watch with developing implications’.

 

On February 29, 2024, KIL informed via the stock exchanges that it has redeemed the rated NCDs in full by raising funds from other lending institutions. As such, the terms and conditions of these instrument did not change and they were not transferred to UltraTech. Basis this, CRISIL Ratings has removed these instruments from ‘Watch Developing’ and reinstated ‘Stable’ outlook while reaffirming the rating at ‘CRISIL BB+ Issuer Not Cooperating’.

 

CRISIL Ratings has withdrawn its ratings on the rated instruments, upon receiving independent confirmation of timely and full redemption of all the rated instruments from the debenture trustee. The rating action is in line with CRISIL’s policy of withdrawal of ratings.  

Analytical Approach

  • For arriving at its rating, CRISIL Ratings has considered the standalone business and financial risk profiles of KIL. This is because the corporate guarantee extended by the company to the debt of its subsidiary, Cygnet Industries Ltd (Cygnet), had fallen off, and there are restrictive clauses as per the terms of the NCDs/OCDs for extending support to group companies (including Cygnet) without prior approval of the debenture trustee. Also, both entities operate in different businesses and have minimal operational linkages. CRISIL Ratings understands that KIL would not extend support to Cygnet.
  • CRISIL Ratings has deducted the exposure to Cygnet (equity investment and loans and advances) from the networth of KIL to calculate its adjusted networth.
  • CRISIL Ratings has treated optionally convertible redeemable preference shares issued to lenders as debt.

About the Company

KIL, part of the BK Birla group of companies, is a diversified conglomerate that manufactures cement and rayon. Cement manufacturing is the primary business of the company. Its cement units in Karnataka and Telangana have aggregate capacity of 10.75 million tonne per annum. After the demise of Mr BK Birla, the company is being managed by Ms Manjushree Khaitan, who is also the chairperson.

 

In fiscal 2020, the National Company Law Tribunal approved demerger of the tyre business of KIL on November 08, 2019, and the scheme became effective from December 04, 2019, with the appointed date being January 01, 2019.

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s) withdrawn

ISIN

Name of instrument

Date of

allotment

Coupon

rate (%)

Maturity

date

Issue size

(Rs crore)

Complexity

levels

Rating assigned with outlook

INE087A07651

Non-convertible debentures

16-Mar-2021

9.10%#&

28-Feb-2026

1,548.5

Simple

Withdrawn (Issuer Not Cooperating)*

INE087A07669

Optionally convertible debentures

16-Mar-2021

8.70%#

30-August-2022

150.57

Complex

Withdrawn (Issuer Not Cooperating)*

# Payable on a monthly basis

& 9.10% for 1-18 months, 11.30% for 19-36 months and 13.10% 37th month onwards until maturity and redemption premium to maintain the overall XIRR of 20.75%

*Issuer did not cooperate; based on best-available information

Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Non Convertible Debentures LT 1548.5 Withdrawn (Issuer Not Cooperating)*   -- 11-12-23 CRISIL BB+ /Watch Developing(Issuer Not Cooperating)* 24-11-22 CRISIL BB+ /Stable(Issuer Not Cooperating)* 27-12-21 CRISIL BB+/Stable Withdrawn
      --   -- 25-10-23 CRISIL BB+ /Stable(Issuer Not Cooperating)* 22-03-22 CRISIL BB+/Positive 14-06-21 CRISIL B/Stable --
Optionally Convertible Debentures LT 150.57 Withdrawn (Issuer Not Cooperating)*   -- 11-12-23 CRISIL BB+ /Watch Developing(Issuer Not Cooperating)* 24-11-22 CRISIL BB+ /Stable(Issuer Not Cooperating)* 27-12-21 CRISIL BB+/Stable CRISIL D
      --   -- 25-10-23 CRISIL BB+ /Stable(Issuer Not Cooperating)* 22-03-22 CRISIL BB+/Positive 14-06-21 CRISIL B/Stable --
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
 

               

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Assessing Information Adequacy Risk
Rating criteria for manufaturing and service sector companies
Criteria for rating corporate sector hybrid instruments
Rating Criteria for Cement Industry

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